What Is Day Trading?
A day trader buys and sells a chosen financial instrument on the same day and usually within a trading session. Day trading is also known as intraday trading.
Day trading is popular with day traders who trade stocks and also with Forex (Foreign Exchange). A day trader does not hold trades overnight.
This guide focuses on day trading for beginners. It looks at several simple day trading strategies, the best market to trade for beginners and a clear plan for getting started as a day trader.
Table of Contents
What can be Traded?
Choosing the right financial instrument is key to day trading success. Day traders favorites for trading are:
Forex (Foreign Exchange) is a highly liquid market, trading over $6.6 trillion 24-hours, five days a week.
Forex is easy to get started as a day trader and with a minimum financial commitment. Suppose you want to know how to start day trading with little money, then Forex is great to start day trading.
The Forex day trader looks for currency pairs and decides whether the price will rise or fall. For instance, with EUR/USD, if a day trader thought the EURO was strong, he would buy the currency pair. If the day trader thinks the US dollar is stronger, he will sell the pair. Effectively, you are still buying the US dollar, even though you are selling.
Day trading stocks can be challenging. The day trader needs sufficient capital to generate a reasonable return. Investing with, say £1000, is going to be a long, hard slog. The average return on stock investing is around 10%. So, if you do well, you’d end up with a £100 profit for the year.
When choosing the best day trading stocks, look for established stocks with good liquidity, such as the S&P 500, FTSE 100 or the S&P/TSX.
TOP Shorted Stocks in UK 2021:
- Metro Bank Plc (MTRO)
- Sainsbury (j) Plc (SBRY)
- Cineworld Group Plc (CINE)
- Petropavlovsk Plc (POG)
- Domino’s Pizza Group Plc (DOM)
There are thousands of cryptocurrencies on the exchanges. Cryptos are volatile, so the day trader needs a good level of experience to catch the price swings, which can be significant.
Bitcoin is the leading cryptocurrency, but other crypto coins for day trading are Ethereum, Litecoin, Cardano, Binance Coin, Ripple, Dogecoin and TRON.
You can trade Binary options with Forex currency pairs, stocks, commodities and indexes. The day trader buys a call for a price rise or a put for a price drop, and the trade is within a fixed period.
The market price must trade above the fixed price on expiry for the call. For the put, the market price must be below the fixed price on expiry.
Even though success with day trading binary options is only two factors, it is surprisingly challenging to master.
Futures are contracts, typically traded on an exchange, that are standardised agreements. One party commits to buying an agreed quantity of a financial asset for delivery at a predetermined future date. The party selling agrees to provide the asset on that date. Day traders may use futures for hedging or speculative trading.
Commodity traders buy and sell physical commodities like oil, coffee, gold and other metals. You don’t physically own the commodity. You are purely trading a commodity.
If a day trader trades both stocks and commodities, it’s worth noting that prices are usually opposed. When stocks are rising, commodity prices are falling and vice versa.
Getting Started (Day Trading for Beginners (UK)
How Much Money You Need to Start Day Trading
It’s easy to get started day trading and with minimum financial requirements.
As a beginner to day trading, it’s essential to build some experience before trading with a lot of money. At first, don’t focus on making profits every day but commit to improving your trading skills instead.
Many authorised brokers offer traders an account with less than a £500 deposit if you want to know how to start day trading with little money.
As your day trading skills improve, the profits will come. Most day traders start by opening a demo account.
What is a Demo Account?
A demo account is a simulated trading platform that replicates the live market. For instance, when day trading Forex, the currency pairs on your trading platform are real-time prices.
When opening a demo account, the broker offers various levels of demo money. Try to trade in your demo account with a similar amount to what you will deposit when you start live day trading.
£50k demo money is not realistic unless you plan to trade live with £50k. Such a large amount of money will not prepare you for live day trading with smaller amounts.
Most professional day traders suggest spending at least three months practising with a demo account.
Pros of a demo account
- Time to practice day trading without risk
- You get used to the trading platform
- You can backtest strategies
- You can create a trading plan based on your experience
- Build confidence for live trading
Cons of a demo account
- Day trading with a demo account doesn’t replicate the emotional reactions you will have when trading with real money
- The longer you delay live trading, the harder it is to get started
Opening a Demo Account
To open a demo account, visit the website of your chosen broker and look for their trading platform software download. For instance, with Forex trading, this may be the MT4 or MT5 Metatrader platform.
Day Trading Courses for Beginners UK
If you want to be a day trader, buy a day trading course. There is so much to learn as a day trader. It’s essential to start day trading with good habits that will help you become profitable.
Choose a trading educator that offers all levels of training, from beginner to advanced, so that you can grow as a day trader.
You can check out a great range of trading courses at Tradenet
Day Trading Mentor UK
As a beginner to day trading, you’ll quickly find the need to talk to an experienced day trader for advice. Mentoring is as important as day trading courses. Tradenet offers mentoring options, with the majority of their packages starting at the student level.
Day Trading Chat Rooms
Tradenet has a popular live-trading chat room where you can learn from traders at all levels and form friendships with other day traders to share tips and successes.
Attending webinars can help to develop your day trading skills. Tradenet provides regular webinars for all levels of day traders.
Day Trading Challenges UK
The Tradenet Challenge
Test your day trading skills with the simulated Tradenet Challenge, where you can trade against other day traders. It’s a great experience and very popular.
Trading Challenge Rules:
- You must trade a $10K simulated demo trading account
- At least two trading days with a net profit of $100 or higher
- Out of five trading days; you must trade at least three
- Reach $500 or more in gain by the finish line to win
- Maximum daily loss of $100
- Maximum total loss of $300
- 6-20 tickets per trading day
- No overnight positions
The World Series of Day Trading (WSDT) UK
Are you ready to challenge yourself in the worlds largest trading competition? You could rank among the top 40 competitors. The Champion wins a Tradenet Pro Package, access to a $240,000 funded account and a $6,000 Tradenet voucher.
Check out the WSDT Entry page for the next available registration date
- You must be at least 18 years old
- Trade on at least 4 of the 6 trading days
- Available to answer calls from WSDT to verify your identity for entry
- You cannot hold overnight positions
- You may not lose more than $3,500 on a given trading day
- Your competition account cannot be at a loss of more than $12,000 at any point in the competition
Books for Day Trading Beginners
There are some fantastic day trading books available for beginner day traders. Below is a recommended list of day trading books and also a couple of trading psychology books by Mark Douglas –
- Day Trading QuickStart Guide – Troy Noonan
- How to Day Trade for a Living – Andrew Aziz
- Advanced Techniques in Day Trading – Andrew Aziz
- Day Trading for Dummies – Ane C. Logue MBA
- A Beginners Guide to Day Trading Online – Toni Turner
- Trading in the Zone – Mark Douglas
- The Disciplined Trader – Mark Douglas
Many great YouTube Day Trading Channels provide information on day trading strategies or the psychological aspects of day trading.
Check out the Free Tradenet trading YouTube channel
Popular Day Trading strategies
Depending on which financial instrument you choose for day trading, you’ll need to figure out a few day trading strategies to suit different market conditions and your day trading style.
Scalping – The day trader that scalps the market looks for small price fluctuations to enter and exit a trade. Scalping is better suited to trading Forex, particularly in the first hour or two of a new trading session.
Range Trading – the price is consolidating in a range. Observe the range support and resistance zones. With careful planning, you can buy the lows and sell the highs until the price breaks out of the range.
Spread Trading – Spread trading is a high-speed strategy and well-suited to more experienced stock day traders. The day trader looks for short-term changes in market sentiment, then capitalises on the difference (the spread) between the bid (buy) and ask (sell) price.
If a bidder price suddenly dropped, a day trader may buy and then swiftly resell at a stock’s ask price or higher. The trader gains profit from the small spread.
Spread Trading is not the most straightforward strategy and probably not best suited to beginners. It requires a sharp mind and quick reactions to spot opportunities to get in and out of the trade as quickly as possible.
Momentum or Trend Following – Market momentum is what all day traders look for on the charts. It can be profitable to jump into a trade, ride the price movement and then exit the trade.
Many day traders use economic news announcements for trading momentum. Market prices for Forex and stocks are reactive to financial statements and, as long as you are on the right side of the price, this strategy can be profitable for the day trader.
7 Secrets To Day Trading Success
Day trading is not easy. There is a high failure rate for day traders. Here are seven of the top secrets for day trading success –
- Create a trading plan – a good plan will make you a better day trader
- Backtest your strategies – work out which strategies suit the market conditions and your trading personality
- Focus on becoming a better day trader – too much focus is on the rewards of day trading and not enough on developing day trading skills. Stop thinking about the money and commit to improving your trading skills
- Develop a pre-trading practice – some day traders meditate or go for a run, walk the dog or watch the markets for half an hour. Arrive at your trading station with a quiet mind
- Check economic news before trading – financial statements can have a massive effect on the markets. Avoid trading around major news announcements such as budget or unemployment figures etc
- Have a high risk to reward ratio (RTR) – professional day traders usually have a minimum RTR of 2 to 1, which means that for every £1 you lose, you gain £2.Even with a 50% win rate, you will continue to grow your day trading account. The higher the RTR, the better chance of success
- Trust your instincts – day trading can be a lonely life, and you’ll likely form friendships with other traders. It’s easy to get swayed when another trader disagrees with your analysis. But, no day trader sees the same thing on the charts. We’re all different.
How Much Money Will You Make?
How much money you make depends on only two factors:
- How much money you have to trade – if you start day trading with £1000 and gain 10% a month, you’ll make £100. That’s not taking into account commission fees. With stocks, in particular, commission fees can wipe out profits if you are trading stocks with less than £100 per trade
- How good you are at day trading – it takes time to develop skills as a day trader. For some traders, it can be years before becoming profitable. As a beginner to day trading, don’t expect to hit the ground running. Think of it as an apprenticeship.
Top day traders can easily make six-figure incomes, but many of them will also teach and create books and courses.
Top 5 Brokers in UK 2021
Finding a good broker you can trust is crucial to your day trading success. Select an established broker authorised and regulated to your country
- Colmexpro – an established online broker, offering their clients trading accounts in Forex, CFD and Stocks.
- IG – offering a good overall platform
- Interactive Brokers – a good broker for professional traders and Research
- Saxo Markets – a popular online trading platform.
- Hargreaves Lansdown – have a good range of investment options
This guide has given you many tips for how to start day trading in UK in 2021. Day trading for beginners can be challenging, but if you take our day trading tips on board, you’ll have a head start on becoming a successful day trader.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor’s financial circumstances.
Day trading stocks, Forex or other financial instruments may not be suitable for all investors as it involves risk and the possibility of a loss of capital.